[pedrocr]

>Every cap weighted fund has a cutoff where it omits companies that are too small.

The whole market isn't just S&P500 funds, if it was there wouldn't be much price discovery. But in the S&P500 I bet most cap weighted funds actually hold all the assets.

>I don't think the small cap stock is "mispriced".

For your argument to hold it has to be. Specifically it has to be priced lower than it should so that an equal weighted fund can outperform a cap weighted fund. If that was the case the large fund manager should pick up that opportunity anyway, even if he can only do it in a lesser percentage of his portfolio than the retail investor. When that then happens those opportunities disappear.

>That's a good thing, but it doesn't justify pretending you don't know things that you do know.

The problem is that you haven't named a single thing a retail investor knows that the 100B$ fund manager doesn't and can't take advantage of.